Question

In the management discussion and analysis accompanying its 2015 ﬁnancial statements, Tiber County reported that ‘‘for the ﬁfth consecutive year revenues exceeded expenditures.’’ However, a note included in required supplementary information disclosed the following:

The county has not been depreciating its infrastructure system but instead has been taking GASB Statement No. 34’s modiﬁed approach.1. What reservations might you have as to the signiﬁcance of the county’s excess of revenues over expenditures in 2015?2. Suppose that you were the county’s independent auditor. What reservation might you have as to the county’s reporting practices?3. Suppose that the county was required to switch from the modiﬁed approach to the standard approach. As of year-end 2015 the estimated initial cost of the roads was $100 million and their estimated useful life was 40 years.a. How would the change from the modiﬁed approach to the standard approach affect the county’s general fund excess of revenues over expenditures?b. How would it affect the county’s government-wide excess of revenues overexpenses?